2016/25 LEM Working Paper Series

Financial regimes, financialization patterns and industrial performances: preliminary remarks

Giovanni Dosi, Valerie Revest and Alessandro Sapio
Evolutionary Theory, Financial Systems, Firm growth, Innovation, Financialization

  JEL Classifications
B52, G2, G3, L2, O3

The evolutionary taxonomy of financial systems, outlined by Dosi (1990), argued that market-based systems would be comparatively more engaged in the exploration of new technological paradigms, as an outcome of market selective pressure, whereas the more institutionalized finance allocation in credit-based systems would give them an advantage in cumulative learning. This article offers a preliminary assessment of those conjectures in light of the institutional change associated with the financialization process and the "maximizing shareholders value" principle. The available evidence suggests that financialization has de-linked the performance of firms on the financial markets from the determinants of firm-level growth and innovation. Selection among companies increasingly occurs on financial markets, along criteria of short-term returns. As such, financialization has contributed to compress and somewhat degrade the specific properties of the finance-innovation nexus of both financial system archetypes, deteriorating both static and Schumpeterian efficiency.
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